Rupee sinks to lifetime low as Trump tariffs shake global markets

The Indian rupee fell to a record low on Monday after U.S. President Donald Trump slapped tariffs on imports from the country's three biggest trade partners, stoking fears of a trade war that rattled global financial markets.

The rupee declined to 87.28 per U.S. dollar before closing at 87.1850, down by nearly 0.7%, its biggest single-day percentage loss since Jan 13.

Asian currencies also slumped after the dollar rallied on Trump's sweeping tariffs that impose a 25% levy on Mexican and Canadian imports into the U.S., while those from China will attract a 10% charge. The tariffs kick in on Tuesday.

 

Asian and European stocks fell on Monday, while U.S. equity futures pointed sharply lower. The Mexican peso tumbled more than 2% to touch its lowest in nearly three years, while the offshore Chinese yuan fell 0.3%. 

While intermittent dollar sales from state-run banks helped limit the rupee's decline, the absence of stern intervention by the central bank was seen by many traders as an affirmation that it is allowing the rupee to move in line with its peers.

The Reserve Bank of India "will allow some more adjustment in alignment with peers," Shubhada Rao, founder of QuantEco Research, told the Reuters' Trading India forum .

The "heavy intervention seen in last 1-2 years is unlikely to be repeated."

Amid persistent headwinds and expectations of the central bank easing its grip, the rupee's 1-month implied volatility has averaged about 3.5% so far in 2025, up from the average of 2% last year.

News on U.S. tariffs is expected to dominate cues for currency markets this week.

"Unless Donald Trump surprises with a very last-minute de-escalation in tariffs (unlikely) expect DXY (dollar index) to stay bid near this year's high," ING Bank said in a note.

The dollar index was last quoted at 109.7, up over 1% on the day.